CTF Services Ltd (NWSGY) Q4 2026 Earnings Call Transcript

Good afternoon everyone. Thank you for joining CDF Services Limited financial year 2026 annual results analyst briefing. I'm Sylvia, the head of group investor relations. In today's meeting, our management presentation will cover the financial and operational performance for the period, provide updates on our five major business segments, and further elaborate on our strategic initiatives. A QA section will follow the presentation. For participants joining us for our webcast, please submit your questions at any time by clicking the question mark icon on the left-hand side of your screen. Our management team will receive them directly on the iPad. Without further ado, may I now invite our Executive Director Group Co-CEO Mr. Gilbert Ho and our Executive Director Group COFO Mr. Jim Lam to kick-start today's meeting. Thank you.

Okay, let me have a quick introduction on our results. So for financial year 26, we continue to have a very stable year, I would say. It's not particularly strong, but it's a very stable year. We have done a number of acquisitions and also a number of disposals. I will talk about the numbers later on and Jim will elaborate on the operations as well as the numbers. But overall, as I said, we have a very solid financial year 26. In terms of the expansions, the financial services showed a very strong momentum and it became the largest AOP contributor. That replaced our role segment as the top AOP contributor. We continue our capital recycling. We disposed some of the assets. We deployed our capital into two focus areas, namely our financial services as well as our logistic segments. As you may also know, during the year we issued the convertible bond and all of them has now been converted. So we restored our public flow. And also that we enabled us to go back into the Hang Seng Camposite Index as well as renewed our Stock Connect eligibility. As you can expect, I mean, our DNA or our business is always a very strong cash flow generation, and that continues to be the case. We lower, actually lower quite a bit on our net gearing ratios and have ample of liquidity for us to redeploy and expand into the two core areas that I mentioned before, the logistics sector as well as the financial services sector. Dividends. We uphold our sustainable and progressive dividend policy. I think this is the 24th year. This is the 24th year consecutively we distribute our dividends. We'll talk about the dividend part later on. So on AOP, we delivered a strong result with $4.59 billion of Hong Kong dollars, AOP increased year by year by 3%. In terms of profit attributable to shareholders, it increased by 11% to $2.393 billion. As you can see in the chart here, 32% of the AOP actually coming from the financial services now, And 31% coming from our road segments, followed by our logistics, 14%, and then constructions, and then last but not least is our facility management. So this basically summarises the entire years of capital recycling that we have done. I will first talk about the monetisation and the disposal first. In October 2025, we first issued the exchangeable bond of 2.2 billion Hong Kong dollars to exchange into our shareholding in Shaocheon. That exchangeable bond, the coupon is 0.75%, it's due 2028. So that actually allowed us to monetize the stock without actually selling it. We can capture the upside. And in the meantime, we have a very low funding cost funds for us to do our acquisitions. And then, between 2025 and 2026, within this entire year, we have done a number of disposals within our strategic investment segments. That total of around $1.3 billion. That consists of a number of different investments, small and big. So in the old days, we have done very much a number of PE investments as well as VC investments. So here are the proceeds coming from those investments. Then in 2026 July, we completed the disposal of one of our Toros, the Cherno Expressway. That came back with 1.6 billion RMB. as well as, I think very importantly, it deconsolidated the net debt of around 1.7 billion RMB. So I think that actually is very important to us because that substantially lowered our net gearing ratios. So in addition to the monetisation, as well as the disposal, we have done a number of acquisitions throughout the year. In November last year, we acquired 13% in USmart, But this is actually a very important step. Not only that, it expanded our financial services platform. These acquisitions, although it's only 13%, only account for half a year, already contributed around 30 million, right?

35 million.

35 million of AOP just for this half year. And then between 2025 December and 2026 January, we consecutively acquired four logistic properties, one in Greater Bay and four in the Yangtze River Delta, so around the Shanghai area. And then in April, we invested in a battery energy storage platform in Finland. Then in 2026 July, we completed our acquisitions of 65% in Blackhorn. Again, that is a very important step in building up our ecosystem in a financial services platform. It enhances the entire capability for us to cross-sell to our policyholders and offer more wealth management products to our customers. Last but not least, in 2026 September, we completed another acquisition of logistic property in the Yangtze River Delta. We also invested in an AI data centre in this September 2026. In fact, we just issued a press release for our investment in a data centre project in Johor, in Malaysia. So that actually marked our first overseas investments of data centre in this month. Very importantly, I have to say that most of the investment, if not all, we don't invest in greenfield investment. So we only invest in brownfield or mature assets. So basically all the investment that we do, no matter if it is warehouses or data centre, is already making cash flow. It is very important to us that we don't take any construction risk. It is really not the nature of our company. So if we go to the strategic priorities and outlook, I will very quickly go through this. As I said, financial services will be one of the core segments that will grow. We will continue to expand this particular platform, especially definitely CDF Live. We will focus very much on the expansion of CDF Live. We will expand the reach of their customers, not only Hong Kong and CMV, Chinese mainland visitors. We have actually very good growth, which Jim will talk about later on, that the customers coming from overseas, including Japan, including Taiwan. We will also look into overseas markets such as Singapore. We will continue to enhance the wealth management platform. Now we have CTF Live, we have Blackhorn, we have USmart. We will continue to utilise all these different units to give more choices for our customers. We will also keep an eye open to see whether there's any acquisitions suitable for this particular ecosystem to expand in this financial services sector. For Toros, I said in the last analyst briefing that we are not going to expand further in Toros. And in fact, after that, we disposed one of the Toros. We will continue to see whether these opportunities to monetise at a good valuation, any of these Toros. I think one of the key words that here is about good valuations. We won't monetise for the sake of just getting the cash flow back because all of the Toros at the moment, we now have 12 Toros left in our portfolio. All of them still generating very good cash flow. So unless we get good valuations, I don't see the needs of the immediate disposal, but if we get the right valuations, we have no hesitation to dispose Toros in this juncture. Logistics. I think the idea, as I said, is to continue to expand in this particular area. Hong Kong, for ATL, we already increased the occupancy rate from 70-odd percent now to around 85 percent by the end of last financial period, which is 30th of June. We will continue to strengthen the operations of ATL and increase its occupancy rates. We will look for value acquisitions. So we've already done four over the last few months. We'll see whether there's any other opportunities. I think it is very important that, I mean, over the last 10 years, there's a period where there's many people chasing for assets in the logistics sectors. we are not those type of people we don't chase assets we only see we only do the acquisition when we see value so now although some of the people exiting the sector it is not because it is really not because the entire sector outlook has been affected it is because some of the funds reached the end of the fun life they have different reasons so we only do acquisitions again when we see value in it, long-term value and good locations. At the end of the day, logistic is about locations, locations, locations, locations. So all the focuses of this is in the GBA area as well as in the Yangtze River Delta. Constructions, we have now four platforms, Sunshine Esther, which focuses on Yenem, we have Hib Heng focused on building we have Wai Bro focused on foundations and then we have Gong Heng focused on concrete. So all this actually can capture very different type of things, especially now as you can see from the government policies, they are very focused on the northern metropolis. How we see it is, especially in the very initial phase It will benefit WIBRO doing the foundation work. This is actually very much stated already in the five years plan as well as in the policy address last week. So we think we can definitely capture that particular market. WIBRO being the top, not the top field, the top, top foundation company. I think we can capture all these opportunities in the northern metropolis. In fact, over the last year, Hi Ping already is doing some of the projects in the northern metropolis. We continue to see the recovery in the residential market as well. Some of the property developers already start bidding land again. So we are very positive about the construction segments. We will continue to do well, especially that we are in the top part of the cake. where we can actually capture the most value out of this particular sector. Last but not least is the facility management. That includes where you're situated here, the HKCEC, GHK and KTSP. CEC, I mean, operationally it continues to be good, but the result is a little bit affected because of the depreciations where we have only a few years left in the concessions. So while the operation is good, we will continue to hit by the high depreciations. We will start the negotiations or discussions with the government on the next concession period for HKCC. For GHK, GHK now mark, I think, the six years, the seven years of its operations. It started operating in 2017, grand opening in 2018. It turns into positive EBITDA in 2021. Now this year's AOP, the infects, the AOP grew four times from last year's, which Jim will talk about. We will continue to see this, this will continue to do well. We will focus on the expansion of the clinics, which drives a lot of the patients from our clinics to our hospitals. We will expand, continue to expand on the clinics as well. We opened one of the clinics in MOT last year. We will look for more expansions this year. The aim of opening the clinics really is not about the clinic itself. It's to channel the patients into the hospital where they can do high-value operations. KTSP, where we only own 25%, This is the second year in its operations. They've already done, I think, over 100 events, including concerts and sports. It meets all the KPI. We do see that it will continue to do well, although this is still the REMA phase, so it is still in the AOL phase. But we definitely will enjoy what we call the 性事经济 from the government. We will see how we can actually do better and improve the operational efficiency. Okay, now I'll pass it on to Jim on the financial updates.

First, a very quick recap on the key financial numbers. Attributable operating profit up 3% to 4.6 billion. Profit attributable to share is up 11% to 2.4 billion. Adjusted EBITDA, which is a proxy of operating cash flow before tax and interest, increased by 1% year-on-year to $7.4 billion. Total liquidity remained very ample, $31.3 billion as of June 2026, comprising of cash on hand $20.8 billion and undrawn committed banking facility $10.5 billion. The net gain ratio decreased by 9 percentage point year-on-year to 28 percent, and net debt balance decreased by 20 percent year-on-year to 11.7 billion. In terms of the debt mix, we turned more bullish on the renminbi exchange rate about 18 months Since then, we've been gradually reducing our renminbi borrow exposure, resulting in a lower percentage of the renminbi debt to total debt. The ratio was 46% in June this year versus 62% a year ago. We believe such move will allow us to benefit from stronger RMB, resulting in a stronger increase in equity on the back of the RMB appreciation. The borrowing cost remains stable at 4.1%, which is unchanged compared with last year. We also done quite a lot of refinancing last year. We did 14.2 billion of refinancing last year, which resulted in our debt maturing within the next 12 months from June this year to 7.9 billion compared with over 9 billion, 12 months of the gold. The majority of this 7.9 billion we expect will be refinanced by December this year. We continue to maintain a very diversified funding channel. We have banking facility of total 35.5 billion onshore and offshore, of which about 10.5 billion remained undrawned. We have two outstanding U.S. dollar bonds. We have issued an exchangeable bond, exchangeable into our approximately 10% stake in Soucheng Holdings, which was issued in September last year. And we have also issued Penda bond, free tranches of Penda bond since 2022. We repaid the first tranche at its maturity May this year, which is consistent with a strategy to reduce exposure to the RMB borrowings. We maintained our APRUS credit rating with JCR and the outlook was upgraded from stable to positive. We also maintain our AAA rating with the domestic rating agency China and Lanhe. As mentioned, our lagering ratio decreased from 37 percent to 28 percent in June this year, which was due to, first, the issuance of 2.2 billion exchangeable bond, second, reclassification of the 2 billion like that associated with Changli Expressway to help for sale as the 30 of June 2022 because we signed SPA to dispose this expressway in May. Conversion of approximately 1 billion of convertible bond and finally disposal process of approximately 1.7 billion. The majority of it come from the disposal of various strategic investments. Page 14. Despite the challenging macro environment both in Hong Kong as well as the mainland. We managed to increase our attributable operating profit, profit attributable to shareholders as well as return equity over the past four years which reflected our successful portfolio optimization strategy as well as our shareholder friendly dividend policy. We have committed to our sustainable and progressive dividend policy since fiscal 19. Today we announced a 4% increase in our final DPS to 33 cents on a comparable basis. When I say comparable basis, it means we will adjust the FY25 final and interim DPS number to reflect the 1 for 10 bonus issue completed in December 2025. So together with With the $0.28 interim dividend, total dividend this year would be $0.61, and that would present a 3% increase year on year. We announced another one for 10 bonus issue. The purpose, just like last year, is to further increase the stock liquidity. Our daily stock's daily turnover volume has increased substantially by about 1.4 times to over $2 million U.S. dollar allowed, thanks to the increase in research coverage by the major investment banks, as well as the free percentage point increase in a fee flow as a result of the CB conversion. Next, I will talk about the performance of each of our four major segments. I will start with financial services. Sorry, as Gilbert mentioned, financial services has become our largest AOP contributor for the first time, overtaking the rose segment. The AOP increased by 19 per cent year on year to 1.5 billion. And CDF life represented the vast majority of this 1.5 billion AOP. although use mark that we acquired in November last year also contributed nicely to the AOP of the segment. The earnings growth was strengthened mainly by the robust CSM release from CDF life which increased by 21% year on year to 1.4 billion. We have also seen a strong increase in both our APE as well as MBP, meaning new business 7% for APE and 74% increase for new business premium. Regarding APE and new business premium, we want to go a little bit deeper because there has been a major shift in the product mix. I think it happened not just to us but also to other life insurance companies in Hong Kong as well as a result of the new commission spreading rule introduced by IAE effective from the 1st of January, 2026. So in the first half of the fiscal year, 2026, we saw a lot of multi-pay insurance policy. So it can be pay, two pay, five pay, ten pay. But moving into the second half of this fiscal year because of the new commission spreading route, a lot of the insurance company including us are selling the majority of the product in the form of single premium which when you translate that into APE calculation you will only the AP you only account ten percent of the single premium as sorry the AP you only include ten percent of the single premium which substantially reduce the AP number for the second half of this fiscal year that's why you know we did not what we did not you know mention a new business premium in the past now we think it's important for investor to also look at new business premium which is defined as hundred percent of the single premium together with the annualized first-year premium. Having said all this, we think, you know, this year you will be quite misleading and not meaningful to look at the year-on-year growth of APE and new business premium between FY26 and FY25. Instead, we will urge you to focus more on the VOMB dollar. Because no matter is single premium or is multi-paid premium, At the end, you will generate the same, you know, VOMB. So we think VOMB growth is the most important metric that you should focus on in fiscal year 2026. Our VOMB dollar increased by 30% year-on-year to 1.3 billion, which is driven by, sorry, the margin also increased from 30% to 37%, which is driven by, as I mentioned earlier, the shift to single-paid premium and also the successful repricing of a flagship product called the MyWealth series. The CSM balance of CDF life increased by 22 percent year-on-year to 11.3 billion, which is quite impressive considering the strong CSM release during the year. The embedded value also increased by 12% on the year to $28.4 billion. The servancy ratio for CDF life stood at 285%, which have already taken into account $0.6 billion of dividend remittance. We believe 285% is one of the highest, if not the highest, among all the major insurance companies in Hong Kong. Because of the very high servicing ratio, we actually think CDF Life is in a very strong position to argue for a further increase in its dividend payout ratio to the listed company. Over the past two years, CDF Life payout about 50% of its profit as dividends. So we think there's room for further improvement in the dividend payout ratio going forward. In terms of the performance of different channels, the agency channel saw a 10% increase in APE and 85% increase in MBP. The partnership channel increased its APE by 16% and MBP by 138%. As mentioned by Gilbert just now, in addition to focusing on the CMV business, we are also developing the overseas business, meaning we establish a relationship with broker to focus on international high-level worth customers. During the year, our APE from these overseas customers increased by 40% year-on-year, and now the overseas customer already accounted for slightly less than 10% of a total APE for fiscal year 2026. In terms of the AUM, our total asset under management for the insurance company increased by 17% year-on-year to $106 billion. Like in the past, most of this investment were allocated to investment-grade bonds, and also we continue to maintain a very diversified geographical exposure, 45% in Asia and Oceania, 40% in North America, and 12% in Europe. The strategy of our investment is to generate sustainable risk-adjusted long-term return in order to support the fulfilment of its obligation to the policyholders. The fixed income portfolio continues to see a small increase in its recurring investment yield to 4.59% in FY26. With the – first of all, we believe there are a lot of new business opportunity in the wealth management industry in Hong Kong, and with the recent acquisition of 30% stake in Usmark, which is a digital brokerage, and 65% in Breckhorn, which is an external asset management, together with the core CDF life insurance business, we think our financial service segment is now in a position to offer integrated financial solutions covering both wealth accumulation as well as protection and retirement. I would move on to Rose, I'm mindful of time, so I would try to finish within the next ten Sorry about that. Rose, as of today, following the disposal of Hulan Changliu Expressway in July, a portfolio not comprised of 12 total project with a total length of 815, sorry, 800 at 15 kilometer. The average remaining concession period for our road portfolio is 11 years. During FY26, the segment AOP was flat year-on-year or 1.4 billion Hong Kong dollar of AOP. The average daily traffic flow and total revenue was down 1% year-on-year. AOP was broadly threat, however, thanks to the appreciation of the renminbi as well as the lower financing costs of the onshore project loans. We disposed the Hulan Channel Expressway in July, which resulted in a 4% reduction in the AOP, which is pretty minimal for the segment, and a live percentage point decreased in the group's lagering ratio which is very substantial and going forward we will continue to optimize our portfolio by divesting selective mature asset with less attractive risk adjusted returns. Logistics. Our logistic business comprise of 56% interest in ATL, almost 100% interest in all the warehouses except SUSO which is 90% in 12 logistic properties in mainland China and a 30% interest in CUIRC. So first, let's talk about ATL logistic. The segment AOP was down 13% year-on-year in FY26 to $645 million. And the decline was driven mainly by the decline in AOP of ATL logistic center. The occupancy rate of ATL logistic was 80.7% in June last year, and then it declined further to 75%, but started to recover to about 85% in June this year. However, if you take an average of the occupancy rate for FY26 and FY25, the average occupancy rate was still down percent, and hence the decline in AOP of ATL. Hopefully, you know, we have already seen the worst of the occupancy rate for ATL given the recovering retail sales as well as the strong import export numbers of Hong Kong. Rental rate of ATL have been quite resilient over the year despite the challenging macro Going forward, we will continue to boost the occupancy rate for ATL through diversifying our tenant base, improving the service quality, upgrading the tenant experience as well as closer collaboration with the leasing agencies. Regarding our logistic portfolio, regarding our logistic centres in mainland China, we have provided deferred tax for the seven, for the 11 mainland warehouses for the first So if you exclude this impact, the mainland, the PRC warehouses, AOP, actually increased by 11% year on year. The occupancy rate has been pretty stable. For the seven existing property, the average occupancy rate was 86%. So as the entire portfolio, including the four newly acquired projects during the year. We remain optimistic on the sector due to growing city distribution demand, increasing e-commerce penetration, as well as the relatively resilient manufacturing activity in mainland Recently, we have entered into the AI-related infrastructure sector, i.e. the AI DC. As of today, we have made investment in one AI DC project in Jiangsu. We have signed SPA to invest in another AIDC project in Herbey province. And this morning, you know, we have also signed SPA to invest in AIDC project in Johor, Malaysia. CRRC, its performance has been relatively stable, AOP up 2%, throughput increased by 8% to 7.6 million TEUs. We think, you know, you will continue to benefit from rising wealth rate demand. favorable policy promoting the multi-modal transportation in China, and also this nationwide legwork comprising of 13 railway container terminal across different important cities in China. Construction, as Gilbert mentioned, this comprise of Hibhang Vibroad, Chongqing, and also Sun Chow Aster. During the year, the segment AOP was down 4% year-on-year to $689 million. Contract on hand increased by 7% year-on-year to $63 billion. Backlog was $35 billion and new contract secured was $17 billion. We have seen a continued increase in our exposure to the government and institutional sector comprising of 66% of backlog. block. Obviously the environment remains quite challenging given the softness in the private sector market. Although we are seeing some private developer in Hong Kong start to beat our tender for residential land in the past 12 months. And we think the order flow should improve going forward. We also want to highlight that despite the challenging operating environment our account receivable management remains very stringent. So if you look at our financial statement, you will see that the account receivable balance of heaping actually decreased by 12% year on year despite a 17% increase in revenue, which means its account receivable date has declined by eight days to only 35 days. I will skip page 31. So page 32, facility management. The segment AOP was down 1% year-on-year to 88 million. The key earnings driver for the segment was Grand ECO, AOP increased by four times year-on-year, EBITDA increased by 15%. Inpatient, outpatient, day case of slumber grew 3%, 1%, 9%, respectively. We continue to expand our clinic-like work through Parkway and Medi-Code. As Gilbert mentioned, we recently opened a new clinic called MediCenter, Granigo MediCenter in Amuti in October this year. And this lab work have contributed approximately 10% of Granigo's gross profit in fiscal 26. And currently, the lab work comprises of seven clinics and one laboratory. Hong Kong CEC, the revenue increased by 8%. And the AOP was down mainly because of the increase in depreciation charge as a result of the shortening remaining concession periods. But if you exclude the depreciation, also capex, the AOP of HKC actually increased by 8% year on year. Kaida Sports Park is still in AOL because it is still in the ramp-up stage. However, operationally, the stadium has hosted more than 150 events. The stadium ran utilization rate was very high, 90%, and the retail mall occupancy also improved 7 percentage points to 87%. It has received quite a number of international awards during the year, like the winner of world greatest places by times, but most importantly, it takes itself rank the first in Asia, and the third globally in 2025. I pass on to Karen to go through our ESG achievement.

I will make it brief. So, thank you, Jim. Before I – oh, sorry. Before I take you through the FY 2020 is an ESG progress, I would like to start with the thinking behind our ESG philosophy. So our approach is built around three interconnected elements, understanding, integration, and action. We start by understanding the ESG risk and opportunity that could affect our businesses. We then integrate those insights into risk management, investment decision, business planning, and governance. And finally, we act by mobilising capital, people, innovation to deliver measurable outcomes. So let me show you how that works in practice. Our climate and nature assessment have given us greater visibility of risks such as heat stress and extreme weather, as well as dependency, including water climate regulation and flood production. But the important point is what we do with those insights. They are increasingly being incorporated into enterprise risk management, project planning, decarbonisation to investment due diligence. So we are moving from simply understand ESG risk, using those insights to make better business decisions. So what has this translated into during FY2026? I won't take you through every number, but let me highlight two. Green and sustainability-linked financing now represent 45% of our total debt portfolio, bringing us closer to our 50% target. And scope 1 and 2 emissions have reduced by 17% compared with our FI 2023 baseline. This is a good example of how ESG is becoming increasingly embedded in how we finance and operate our business. Our progress has also been recognised externally. This year, CTFS achieved a AAA rating for the first time in the Hang Seng Corporate Sustainability Index Assessment. External recognition is not the objective, but it provides a useful, independent benchmark of our progress. Our focus remains on underlying capabilities and resilience that support long-term value creation. Turning to capital, this slide shows you how ESG consideration is influencing both our financing and investment decision. We launched our sustainability-linked finance framework to strengthen the alignment between our sustainability target and financing. Our investment ESG consideration are increasingly integrated throughout the investment lifecycle. One example is our strategic investment alongside Unison in a battery energy storage system in Finland. It's supporting renewable energy integration and grid reliability. With CTF Life, the investment portfolio carbon footprint has been declined by 12 percent compared with FY 2023 baseline. This example demonstrates how sustainability is increasingly shaping our way but with how we finance and deploy capital. So I think what we have mentioned is how we making better decision. I think in the era of data-driven era, better decision also depends on better data. Approximately 61% of our scope-free emissions are now calculated using higher quality supplier-specific or physical activity-based data, covering approximately 96% of our total scope-free emission. So this gives us better visibility of emission hotspot and helps us focus on decarbonisation effort where they can make the greatest difference. So this is not simply about better reporting, it is about enabling better decision and more targeted action. So what in action now? So we're also translating this insight into operational improvement. At HIPHANG, a carbon estimation tool is being developed to help project teams identify emission hotspot earlier and access reduction opportunity during project planning phase. As HML, more than 27 energy efficiency projects were completed during the year, delivering estimated annual energy savings for more than 700,000 kilowatt per hour. So they are practical examples of sustainability and operational efficiency reinforcing each We also see the same connection between sustainability and resilience elsewhere in our portfolio. Across our four newly acquired logistic warehouses, on-site solar generation supply approximately 75% of electricity demand. With roles, technology such as slope monitoring, bridge structure health monitoring, and intelligent traffic management are helping our business anticipate and respond to climate-related risk. For us, ESG is not only about reducing our environmental impact, it is about strengthening the resilience and long-term performance of our asset. So ultimately, sustainability is implemented by people. So this year, we continue to invest in building ESG capabilities and empowering colleagues across the group to turn ideas into action. Our aim is for ESG to become part of everyday decision-making rather than somehow owned by one team. So during FY2026, we strengthened our understanding of ESG risk and opportunity, integrated those insights into business and investment decision, and translate them into tangible action. Looking ahead, our focus remained on strengthening resilience, embracing innovation, and allocating capital responsibly to create sustainable long-term value for our investor. So thank you very much.

Thank you, Karen. So we are now moving to the Q&A session. If you would like to ask the question, please state your name and organisation you work for.

Hi, this is Geoffrey from CLSA. Thank you very much for the presentation. So maybe starting with insurance, So just want to get a sense on how the business momentum is going after period and going into July, August. Anything you can comment that will be helpful. And second question on maybe just going to ATL a little bit. On the pickup of occupancy to 84% or 84.5. So can you give us a little bit more color whether the additional occupancy is from existing tenants or new tenants? and also any comment on the average rental growth for FY26?

For the first one, for the July or the last three months, the third quarter of this year, I think you're referring to the, especially after the new policy commitment from China. I think we are very similar to all the other insurance company. we do see some reservations or slowdown but it's not significant. We're talking about a single digit slowdown in terms of the people coming from China to buy insurance policy from us. If we compare to the information that we've got with the industry we in fact were a little bit better than them. We do think that this effect is short term. I think people are putting in a wait-and-see mode. I mean, as you know, China has been putting out different policies over the last few years. I think for the first few months, it is very obvious for the people to wait and see until it becomes more clear. And I think fundamentally, because of the rate differential, interest rate differentiations, and also the protections that we can offer in most of the insurance companies in Hong Kong, that actually differentiate us from the policies from the insurance company in China. I think there's still fundamentally, we still have the attractiveness of insurance in Hong Kong.

Whether you have anything to add. Yeah, just want to supplement. When Cuban mentioned there is a single-digit U.N. year decline in U.N. B dollar in July and August combined, bear in mind that we are comparing July and August this year with July and August last year, and July last year was actually a very, very strong month because of the a lot of, you know, policy submission in June last year ahead of the illustrative return cap introduced by the IA. A lot of the clients, they submitted their policy in June, which Daniel spilled over into July. So our VOMB dollar for last July was three times the average normal level. So a single-digit year-on-year decline in VOMB for July and August this year is actually, I would say, is actually quite satisfactory.

I think that also answered one of the online questions that actually asked about the so-called differences in the growth rate on the second half of this year compared to the growth rate of the first half of our financial years. On your second question about ATL, a lot of them are new tenants. Obviously, we have some renewed, but a lot of them are new tenants. That actually drives the occupancy rate back up from 70% to 85%. In terms of the rental rate, average rental, if we're looking at the full year average rental, it actually increased compared with last year's. Low single digit. Low single digit.

Timothy from City.

Thank you, management, for the opportunity to ask the questions. This is Timothy from Citigroup. I got two questions as well, if I may. The first one is about the bonus issue. So would you mind elaborate a little bit more about the thought process from the management in terms of pushing forward this kind of bonus issue? Of course, from a sell-side bank's perspective, we are always welcome for more liquidity and more trade, potentially. But I'm just trying to understand, is there a target of average daily trading value or volume that we are going for with last round of course we are trying to get back to stock connect so i'm just wondering this this round is there something that we are looking at and please allow me to ask a not so intelligent question which is about the uh you know dps does it mean that you know next year dps would likely be you know 10 lower so that is the first question um the uh the other question is about the data's ai dc acquisition so i'm just curious because, of course, AI and data centers are likely going to be a very strong growth engine going forward globally as well. But in the market, to what I understand, usually these kind of AI DC devaluation might be a little bit ludicrous. So I'm just wondering because of the, unfortunately, lack of the disclosures on, totally understand that because of ongoing investments probably will affect other potential deals. But just wondering what kind of expectation, you know, valuation range and, you know, target about our future logistic kind of business mix between different segments going forward.

I take the most easiest one first, right? The DPS growth. Yes, we always look at comparable basis. I think, you know, that sort of answer your question. And also your first question, stock turnover target. obviously the higher the better but you know we allowed you know as I mentioned and now our daily stock turnover volume is about two million US dollar a day we do recognize that you know you know to attract some of the bigger size fund you know we do need to get across the five million US dollar per day trust hold so we are you know aiming towards not that trust hold I think I just want to supplement a little bit on that we don't we don't really have a target of what's the volume.

But at the end of the day, as Jim said, the higher the better. I think it goes both ways. When the stock is more liquid, it's more lucrative, it actually drives the share price as well to a more realistic value. I mean, personally, I think I'll start under price. So maybe I put the excuse on the liquidity, but I think that's one of the real excuses that we are having because we are a relatively high dividend new stock. A lot of people actually buy and hold rather than trade. So we do want to create more liquidity out there. In terms of AIDC, maybe we both can answer that question. I think, first of all, there's no set target of how much we're going to put in these sectors. I think we are a very, first of all, we are very disciplined investors. We don't really say that we're going to expand this to overtake whatever portion of the logistics sectors. I think we just see that as a whole. The logistics sector or the infrastructure, I mean, CDFS traditionally has been an infrastructure company. and we just need to modernize ourselves to go into the new infrastructure and when we do AITC we don't really do the high technology stuff we don't do the chipset we don't do the rank we basically just do the box so it is no difference it is no difference to how I see the traditional warehouses and in fact we're looking at it like a traditional warehouses we're looking at it using cap rent okay so we we are not using the aidc uh like vnet and all this other company where you're looking at the pe we are not doing that because we're basically receiving rental uh on the rank and also on the operators so um again i'm not going to disclose what kind of valuation that we're buying but i can assure you um whatever brian is buying is very conservative I mean, we're definitely getting value out of money on that And we, I mean, it's even below a disclosable transaction It's a very small amount So we're still building the base out of this particular sector Thank you Jeff from DBS

Hi Sorry, time down Jeff from CRSA Sorry, sorry, I'm almost mixed up myself So just switching the gear a bit to construction, obviously you hinted the margin is lower. So just want to understand maybe what are you seeing? Is it because of the mix of the projects or is it still because of the labour shortage? If it is the latter, then can you give a little bit colour on what we are seeing in the labour market for now?

I'm asking whether we hinted that because I don't realise we don't really have...

The gross margin for the construction segment this year was marginally lowered as compared with last year. But bear in mind that the project that we are working on in FY26, it was secured like two or three years ago and during that time it was still a downturn of the property sector in Hong Kong. As a result, you know, we need to be more competitive in terms of pricing.

Dr. And I think it's worthwhile to know it was also slightly affected by the projects of ESTA. because one of the big projects of Esther has a lower margin because, of course, overrun. So that actually affected the overall margin of the construction segment as well.

Okay, thank you. We have a question online. It asked about the CDF Live dividend payout ratio was 50%. Can you talk about the actual cash flow that CDF is getting from CDF Live last fiscal year?

That is very easy to answer. In FY26, we received about $640 million Hong Kong dollar dividend from CDF Life, which represented 50% of its AOP in FY25.

Okay. Is there any other questions? Evan from HSBC.

Thank you. Evan from HSBC. I have two questions. One would be on your construction business. How do we think about the upcoming pipeline of new projects for the next financial year or two? And how the northern metropolis could contribute into a long run? We think about revenue over a series of years. And then the second question would be on the Kaitek Sports Stadium. When should we expect we'll start providing a profit on just the operating profit basis? Thank you.

For constructions, I think we already have disclosed a very strong pipeline in terms of the new projects that we received. I think with what Jim has already mentioned, with the warming up or slowly recovery of the residential market, But we do see the new contracts that we are getting will be steady. As you can see, actually, from the result of the entire construction segment, it has been very steady, even for the 12 days of the property market. So I don't really see there will be any challenges in the construction segment. In fact, I do see the upside of that because of the, as Evan mentions, about Nuffin Metropolis, not only on Hip Heng, but also on Whitebrook, which is the foundation company. I mean, if you're looking at the policy address, it talks about a few very important information. is talk about the three university town, which is over 1,000 hectares. And then it talks about nine development districts. And the first thing they mention is about foundation. So that definitely will benefit Wibro, because Wibro is, again, is not one of the foundation companies. It's the top foundation company. And in fact, there were two, actually not two, there are many projects that we are getting the projects on technical basis and beating our second beaters by a couple hundred of million dollars, meaning we are actually premium to them. We are charging more to our second beaters and not less. So we are actually winning by the technicality. So we've received more money and the vendor or the government or the owner actually happy to pay that premium. So I definitely will see there's actually more opportunities coming out from the northern metropolis. In fact, I think the construction sectors, while it will be steady, but I think it will be steadily growing.

KaiTac.

Oh, KaiTac. Sorry, what's the question on KaiTac?

When will you break Ethan?

I'm only at 25% older. No, I think seriously, I don't really have a forecast on that. But I think it would take at least another 12 to 18 months, I would say, for it to break even. Operationally, it's already improved a lot. The margin improved a lot. But it really takes some time to optimise the operations. So we already see that, I mean, to be very honest, I mean, all of you guys are friends here. So we already see that some of the human power are excessive. So we're doing something to optimise that. And you can also see the Kaiduck Mall has more traffic now and also has more occupancy. And for some of you who are suite owner of KaiTech, some of them are laughing already, you probably already received, because of the renewal coming up, you will see that the price increase is three times at the very minimum. And people are still bidding up for that. So you can see that actually the entire result is coming up, but it will take some time. Because, I mean, street is a very typical example. Two years, three years. The two-year contracts, there's only a few of them expiring this year. Three years is next year. So next year, there will be a lot of them expiring. And we're talking about three times of the rental, four times of rental. So, yeah.

Thank you, Gilbert. So we received a question online. Adjusted EBITDA is your proxy for cash flow, which is $7.4 billion, and dividend is $2.8 billion. So how much capital have you reserved for acquisition per year? And your gearing target, what is that? And can the dividend still go further up?

$7.4 billion is the operating cash flow, but we do need to pay taxes as well as interest expenses. So if you let off these two items from 7.4 billion, we end up with slightly more than 5 billion. So after, you know, paying 2.8 billion, we still have slightly more than 2 billion of cash reserve for acquisition. The gearing target is about 40 to 45 percent range. Can dividend go up further? There's always a possibility. And, you know, already raised the dividend this year. But, you know, at the end, right, it all depends on, you know, how strong our just EBITDA growth and also how strong our AOP growth.

Zoe from HSBC.

Thanks for the opportunity. I just want to understand, because I understand the company has acquired many businesses, including the USMAR, including Backhorn, and logistic properties. I want to understand the profit contribution from these newly acquired businesses and what is your expectation about the contribution next year?

Very good questions. I think, first of all, we are not acquiring this. Some of them are. But we are not acquiring these companies solely for the profit contributions. I think it's about the platform that we are building, especially Blackcoin and USmart. I mean, honestly speaking, Blackcoin is a relatively small year-end company. It is about the services that we can actually provide to our existing policyholders and actually attract more customers to provide a diversified type of products to them. Obviously, Usmart. Usmart gives a very good return to us already. We only own 13%. Already have a very strong AOP contribution this year. We do expect, because of the trading volume increase in both Hong Kong and the US stock. So people will use more of the textual services. So we do expect that it will continue to provide very healthy AOP contributions. In terms of the field logistics acquisitions as well as the data centre, as I said, I think we are looking more on a yield play. At the time of the acquisitions, our general hurdle rate, We're talking about a cap rate of low less than 6%. So you can basically back calculate everything from there. I don't really have a target of what kind of profit contributions or cash flow contributions that we can come. But I think for logistic, it's more about a stable cash flow that it can provide to us, both in the warehouses as well as the data centre.

Thank you. It's about time. So that concludes today's analyst briefing. If you have further questions, feel free to reach out to the Group Investor Relations team. And thank you for your support, and I hope to see you next time.